PACIFICORP CAPITAL v. CITY OF NEW YORK

United States District Court, Southern District of New York

July 16, 1990

PACIFICORP CAPITAL, INC., PLAINTIFF,v.THE CITY OF NEW YORK AND JOSEPH A. MESSINA, EXECUTIVE DIRECTOR OF FINANCIAL INFORMATION SERVICES AGENCY OF THE CITY OF NEW YORK, DEFENDANTS, AND INTERNATIONAL BUSINESS MACHINES CORPORATION, DEFENDANT-INTERVENOR.

The defendants rely particularly on Burroughs, a case in
which the court found that the purchase of computer hardware
and software fell within the service exception to the
competitive bidding requirement. The facts and the RFP in
Burroughs showed that in that case the government agency was
seeking the design of a computer system to meet its future
needs:

Both the RFP and the undisputed facts contained in
the record establish that, rather than a group of
physical articles of electronic hardware, [the
governmental agency] primarily was seeking the
design of a computer system which would provide
prompt, efficient, cost-effective computer
services to satisfy its growing and increasingly
complex needs for the next five years. Such a
design required the employment of the highest
skills in the field of computer science. Vendors
were allowed considerable discretion in the RFP in
proposing the hardware and software components of
the system, and they were also encouraged by
[agency] officials to be innovative and flexible
in meeting the required specifications in their
design proposals.

Burroughs, 91 A.D.2d at 1078-80, 458 N.Y.S.2d 702.

Although the defendants contend that the award of this
computer contract to IBM falls within the service exception and
is governed by Burroughs, the RFP and facts of this case do not
suggest that the City was seeking the design of a computer
system. On the contrary, an examination of the RFP and the
other evidence shows that the City knew the specific type of
computer equipment it needed to meet its needs, namely an IBM
3090-400E or equivalent. FISA had conducted its own study of
its computer needs and had hired an independent consultant,
Systems Methods Associates ("SMA"), to perform a capacity study
for FISA. See Defendant's Exhibit A. Both FISA and SMA
specifically recommended that the City procure an IBM 3090-400E
or equivalent. The proposers had little discretion under the
RFP in selecting the hardware or software. The RFP did not
invite innovative design proposals for a computer system. The
only services which the RFP called for were installation and
maintenance, services which accompany many machine purchases.

According to Mr. Messina's testimony, competitive bidding
should be used either when the City seeks to purchase a
specific item, or when the City can bid out a detailed list of
specifications. When competitive bidding is used, the contract
must be awarded to the lowest responsible bidder. Messina
testified that his staff recommended that the procurement be by
RFP,

Primarily because there are a few manufacturers of
computers and a few vendors that sell different
manufacturers and we were looking for the best
proposal for the city, also being that we could
not clearly state the definite specifications as
it pertains to the environmentals needed to
support that computer.

When contracts are competitively bid, they must be awarded to
the lowest bidder. Although neither the statute nor the
decisions clearly define the special case exception, both
clearly suggest that a special case is limited to circumstances
in which it can be demonstrated that it is impractical and
inappropriate for price alone to be the determining factor.

These early decisions do not provide a specific definition of
"special case," but they do make clear that the Board of
Estimate must decide on a case-by-case basis whether to
dispense with the requirement of competitive bidding.

The law confers upon the common council the power
and duty of deciding in each particular case
whether [the provisions of the charter requiring
advertisement for sealed proposals and a contract
with the lowest bidder] shall be dispensed with,
and requires a vote of three-fourths of all the
members elected to accomplish that purpose. This
is eminently a discretionary power which cannot be
delegated. It is their judgment which the law
requires and not that of any officer they may
designate. There is no provision in the law itself
authorizing them to delegate this power, and the
case falls within the settled principle that
powers of this description, involving the exercise
of judgment and discretion cannot be
delegated. . . .

Matter of Emigrant Industrial Savings Bank, 75 N.Y. 388, 393
(1878); see also Phelps v. Mayor, 112 N.Y. 216, 219-20,
19 N.E. 408 (1889); James Shewan & Sons, Inc. v. William Wirt Mills,
211 A.D. 687, 691, 208 N.Y.S. 381 (1st Dep't 1925). Thus, the
City's contention that all computer contracts are special cases
under section 343 is not supported by the law. Only the Board
of Estimate can determine what constitutes a special case, and
it can do so only on a case-by-case basis.

The evidence shows that the Board of Estimate did not have
sufficient factual information to exercise its judgment when it
awarded this contract pursuant to the special case exception.
Although the language of the Board of Estimate resolution
recites that the contract is awarded pursuant to City Charter
section 343(a), it also states that the contract is awarded
without public letting in accordance with the report of the
Deputy Director of Management and Budget. That report
(Defendant's Exhibit J) does not attempt to explain to the
Board of Estimate why this procurement should be treated as a
special case by the Board. Both Mr. Messina's testimony and the
Guidelines for Mayoral Agency Contracting make clear that in
some situations competitive bidding is not the most desirable
procurement method:

The term "special case" applies to those
situations for which competitive sealed bidding
would not be suitable.

While competitive sealed bidding is used for
procurements when competition can be based on
price alone, the RFP process is a valuable means
of ensuring that specialized experience,
professional skills and innovation are also
given consideration when selecting a contractor.
When the requirements of a project are not
sufficiently defined for the use of competitive
sealed bidding, the RFP process is appropriate
for soliciting the information the agency
requires to select a contractor.

Guidelines for Mayoral Agency Contracting, Part II, Ch. 1, 1
(1989). The report sent to the Board of Estimate in this case
did not advise the Board that this procurement should not be
based on price alone. Nor did it identify any other
circumstances that made this procurement a special case.
Rather, it appears that FISA determined that this was a special
case, and did not seek the Board of Estimate's determination on
the question as the law requires.

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